On June 24, 2024, the United States Supreme Court granted a petition filed for the trademark infringement case, Dewberry Group, Inc. v. Dewberry Engineers Inc., appealing the decision of an appellate court. The case centers on a profits award – a court order requiring money to be disgorged – granted by the U.S. Court of Appeals for the Fourth Circuit. Dewberry Group, an Atlanta-based real estate development company, had found itself embroiled in a legal battle over trademark infringement of the word “Dewberry,” with Dewberry Engineers, another company operating in the same region, who provides real estate-related services like architecture and site development. Dewberry Group had rebranded to its current name in 2017, and was sued by Dewberry Engineers for alleged infringement of its trademark, “Dewberry.” The Fourth Circuit awarded Dewberry Engineers a hefty $43 million in profits made by Dewberry Group’s affiliates, even though Dewberry Group itself had made no profits from infringing on the trademark. These affiliates were not party to the case.
Dewberry Group Fights Back: The Limits of the Lanham Act and Piercing Corporate Veil
Dewberry Group challenged the ruling on the grounds that the Fourth Circuit had overstepped the bounds set by federal law by ordering disgorgement of $43 million. They pointed to the Lanham Act, the federal law governing trademarks, arguing that it allows only for the disgorgement of a defendant’s profits made under infringement of the trademark, and not to the profits of its affiliate, which is beyond that threshold. Furthermore, Dewberry Group asserts there was no justification for the Court to pierce the corporate veil to hold it liable for the actions of its subsidiaries. The Fourth Circuit panel, however, argued that the corporate veil could be pierced here because Dewberry Group had admitted it provided substantial corporate resources to its affiliates and that this sufficed to show that the affiliates functioned as its “alter egos.”
Dewberry Group’s arguments are bolstered by rulings from other federal courts. Both the Ninth Circuit and the Eleventh Circuit have previously ruled that companies seeking to collect profits from affiliates in trademark infringement cases must first prove that the legal separation between the companies (the corporate veil) could be disregarded because the subsidiaries had acted as “alter egos” of the company instead of separate entities.
Potential Impact of the Supreme Court’s Future Holding
The Supreme Court’s decision to hear this case has significant legal and business implications. A ruling in favor of Dewberry Group would establish a clear limit on the reach of trademark infringement awards and set a precedent that clarifies the boundaries of the Lanham Act. Courts would be restricted to awarding profits made by the infringing company itself, and could not go after profits of affiliated entities. This would provide greater certainty and predictability for businesses with complex corporate structures.
However, a ruling against Dewberry Group could also create a more uncertain legal landscape. Companies suing for trademark infringement might forum shop, seeking jurisdictions that are more likely to award profits from affiliated companies. This could also make it more difficult for businesses to isolate risk and liability within their corporate structures.